Claiming interest payments on tax

Hello

To my understanding you can claim all your interest on an investment loan. One thing to take into consideration is If you have a principal and interest loan over the years you pay less interest as you loan decreases thus decreasing what you can claim back at tax time. Still the benifit of this is that you will get to own the house after the loan expires. If you are looking for capital gains it is often prefered by most investors to pay interest only on your loan. This allows you to always claim the same amount back each year. The downside is you never own the property, but it has better tax ramifications if that is what you are looking for. The second option is generally used for negative gearing or nuetral gearing, I dont think it would work as well with positive gearing because this limits the returns from your investment. Hope this helped

Scott

Together we combine our strenghts and eliminate our weakness

Allan

If you move out of your PPOR and start renting it out, the interest should be claimable from the date that it is on the market for rent. (ie even if nobody is in there, as long as you are trying to find someone).

Terryw
Discover Home Loans
North Sydney
[email protected]

Yep, that’s the theory Allan.

Another tip for this process. If you move into the new PPOR when you first buy it and do ANY improvements at all eg paint job, change flooring etc then get it revalued just prior to renting it out as any capital gain you get from the improvements would be CGT free should you chose to sell down the track.

Now I’m not an accountant but I think that if you wish to do renovations after tenants have moved in then you need to wait at least 12 months after it’s been rented out to claim any major work (ie over about $500) as maintenance or replacement. Definitely consult a quantity surveyor and an accountant to get the full story of allowable deductions, tax saving methods etc.

[]
Mel
[email protected]

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Now, if you continued this way unchanged, for the full duration of the loan – say 25 years – would that mean your total loan repayments will have only been $150,000 – that is, the same as your initial purchase price because the tax dept. effectively paid your interest?

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No. All the money you pay on interst is not just refunded to you. It comes of you taxable income at the end of the year.
Say you made $60k a year and paid $10k interest on your ip you dont just get the $10k back. They take your $60k wages minus the $10k interst to give you a new balance of $50k wages. Now you have paid tax for $60k so the difference between the tax you have paid and the tax you should have paid on $50k is refunded. The problem you will also have is that you are +cf so the $50k is inceased by what ever returns you get from the ip. If you are negative or nuetral gearing and pay enough interest on enough properties (considering what you pay in interest you recieve back in rent so you are not actually out of pocket) you can reduce your income to $0 and recieve all your tax back or in some cases be credited by the ATO. Being credited is good so if you do decide to sell your properties down the track you use your credits to pay less capital gains tax. If you want to read a book concerning tax try “born free, taxed to death” by rory orouke, he is a real estate agent in Perth. I think all this info is correct and Im sure if Im wrong someone will jump in and tell me. Hope this makes things easyier for you.

Scott

“Together we combine our strenghts and eliminate our weaknessess”

Allan

If the +cf from you ip on top of your pension took you over the tax free threshold then yes you would have to pay tax on it. In regards to your other question I think you can only get back as much tax as what you have paid out, and after that amount you get back tax credits. If you dont pay any tax at all at the moment you must be careful not to spend all your money from any +cf ip in case your circumstances change and you get hit wiith a tax bill.

Scott

“Together we combine our strengths and eliminate our weaknesses”

Hey guys,

Just contacted State Revenue Office in Victoria to clear up a few things about FHOG.

1. Must move in within first 12 months of purchase (We already knew that)

2. There is no specified end date for the grant at this point in time.

3. As of January 1st, you must use the property as your PPOR for 6 months minimum before you can use it as IP.

Previously, there was no minimum amount of time that you had to stay there before moving out, but the SRO would indeed conduct some auditing if moved out too quickly. They would get you to fill in paperwork explaining circumstances for moving out, how long you lived there etc. They would also look at usage on your accounts. [}]

If anyone else has questions, ring General Enquiries line on 132161 (Victoria).

Hope this is useful,
Steve

“Knowledge is Power”

Hey SIS,

Damn good question. If you look at http://www.firsthome.gov.au/ you can view the eligibility checklist for each state. Go down to the bottom of the page and select the applicable state.

I’ve never seen or heard evidence to say that you can’t claim the grant under those circumstances. It does seem like a too good to be true loophole though.

I tried contacting the State Revenue Office, but it’s outside their working hours [!] Sorry!

Hope the website is of some help to you,
Steve.

“Knowledge is Power”

Hi team,

quote:

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what if your first property you purchase is after when FHOG became available and your first property purchase is an IP.

Would you still be eligible for the FHOG, when you buy an actual property, that is not an Investment Property but going to be your PPOR because you are moving into it now?

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The answer is YES,, Here is the link to the Queensland Government FHOG link-

Go down to the 5th question here is what the question and answer is.

I have owned an investment home previously. Can I still be eligible for the grant?

A person is not eligible if they or their spouse (including de facto spouse) has had a relevant interest in any residential property in Australia prior to 1 July 2000, whether they live in it or not.

However, a person may be eligible if they or their spouse (including de facto spouse) has only ever had a relevant interest in any residential property in Australia on or after 1 July 2000 and they have not resided in that property.

However i called up the FHOG Branch in Brisbane and spoke to a FHOG officer, to confirm this and they said yes this is still legal and claimable.

First Home Owner Grant
Postal Address:GPO 2593,
Brisbane Qld 4001
Phone:1300 300 118
Fax:(07) 3227 8292
E-mail:[email protected]

Im not sure about other states, but i suggest you check and find out cause you might still be applicable to do so as well.

Thanks very much for the link YoungInvestor.

cheers
s.i.s

Save on a regular basis
“People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”
http://www.theenlightenedway.com/tools/mil_calc.shtml

Thanks Mortgage Hunter,

I am lucky and with in the time frame, just a quick question, to anybody who knows….

How long around will FHOG be around for, before the government takes it back?

cheers
s.i.s

Save on a regular basis
“People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”
http://www.theenlightenedway.com/tools/mil_calc.shtml